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A 7-Point Money Checklist for Year-End Success

Before the New Year arrives, don't miss last-minute opportunities to save money. Use this 7-point checklist to manage your money wisely before the December 31 deadline.

By
Laura Adams, MBA
6-minute read
Episode #617
year end savings
The Quick And Dirty
  1. Max out a workplace retirement account
  2. Boost your retirement savings rate
  3. Make the most of your medical insurance
  4. Drain your flexible spending account (FSA)
  5. Prepay tax-deductible expenses
  6. Spend your credit card rewards
  7. Review your emergency documents and beneficiaries

While year-end can be an incredibly busy time with holiday planning, travel, and celebrations, there’s also a lot to remember about managing your money wisely. December 31 is the end of the tax year, which is a critical deadline for your personal finances and last-minute opportunities to save money.

Before you toast the New Year, use this 7-point checklist to improve your finances while there’s still time.

Tips to Improve Your Personal Finances Before Year-End

1. Max out a workplace retirement account

If you have a retirement plan at work—such as 401(k), 403(b), 457—or a government Thrift Savings Plan, review how much you contributed for the year. For 2019, you can contribute up to $19,000, or $25,000 if you’re age 50 or older. If you can max out your retirement account or get as close as possible before December 31, I highly recommend it.

By deferring tax on your contributions, you keep more money in the account that can grow over time.

Every pre-tax dollar you contribute to a traditional retirement plan is income you avoid paying tax on until you make a future withdrawal. By deferring tax on your contributions, you keep more money in the account that can grow over time. You get this fantastic tax benefit, even if you don’t itemize deductions on your tax return.

Additionally, many employers match a percentage of your contributions to company-sponsored retirement plans. Taking advantage of that benefit is a terrific deal because you receive free money to build a larger nest egg and cut your taxes at the same time. Even if you can’t afford to max out a workplace retirement plan this year, try to contribute enough to max out any employer matching funds.

With other types of retirement accounts, such as an IRA or a SEP-IRA, there isn’t a year-end deadline. You can make deductible contributions for a tax year up to the due date for your tax return, including any filing extensions.

2. Boost your retirement savings rate

The year-end is a great time to increase your retirement savings rate for the next year. You can log on to your online retirement account to make contribution changes or ask your benefits administrator or an account custodian for help. The annual limits in 2020 are going up to $19,500, or $26,00 if you’re over age 50. Make a goal to boost your contribution rate by at least one percent each year until you hit the maximum limit.

If you haven’t started saving for retirement yet, don’t make the mistake of thinking you’re too young, or that you’ll make up the difference later. Young people can amass a fortune on far less time than someone who starts investing later in life.

Even if you can save only a small amount, such as $250 a month for a modest return over several decades, you could easily have close to $1 million to spend in retirement.

Even if you can save only a small amount, such as $250 per month for a modest return over several decades, you could easily have close to $1 million to spend in retirement.

3. Make the most of your health insurance

Your health insurance benefits and deductibles are tied to an annual schedule. So, year-end is the time when you can squeeze more value out of your health, dental, and vision policies.

If you’ve already met your annual deductibles, you can save money by scheduling needed appointments and paying for healthcare before the end of the year. 

If you’ve already met your annual deductibles, you can save money by scheduling needed appointments and paying for healthcare before the end of the year. Otherwise, starting on January 1, your deductible resets.

In other words, after you reach your annual deductible, you have the opportunity for your insurance company to pay as much of your medical expenses as possible. Delaying appointments means you could end up paying more than you have to.

But don’t go overboard on appointments. Plans typically have a maximum number of visits for services such as doctor checkups, dental cleanings, physical therapy, and prescription eyeglasses. If you’re not sure if you’ve maxed out your insurance benefits for the year, ask your doctor’s office to find out what’s covered.

4. Drain your flexible spending account (FSA)

If you have an FSA through your employer, it’s also linked to the calendar year. Many employers offer these medical spending plans to help workers save for qualified expenses, such as childcare and medical expenses, on a pre-tax basis.

However, there’s a deadline to spend your FSA each year, or you forfeit most of the excess. This is known as the “use it or lose it” rule. The cutoff varies by company, but it’s typically December 31.

You might opt for preventive care or supplies, such as dental checkups, vision exams, new prescription glasses, or contact lens solution, so you don’t lose one penny in the account.

If your employer adopts a grace period permitted by the IRS, you may have additional time to spend funds in the account after the new year or carry over a small amount, such as $500. If not, be sure you drain the fund before the end of the year.

You might opt for preventive care or supplies, such as dental checkups, vision exams, new prescription glasses, or contact lens solution, so you don’t lose one penny in the account.

Note that if you have a health savings accounts (HSA), there’s no spending deadline. Funds can stay in the account indefinitely with no penalty even if you change insurers, become uninsured, or are unemployed. So, don’t confuse these two medical savings accounts.

5. Prepay tax-deductible expenses

Another smart year-end tax strategy is to pay or prepay as many tax-deductible expenses as possible. If you can itemize rather than claiming the standard tax deduction, there are valuable deductions that can reduce your taxes for the current year. Here are a few to consider:

Charitable donations are deductible in the year you pay them. In other words, if you initiate an online payment or make a credit card charge before December 31, it counts for the current year, even if you pay the card company next year.

Medical expenses are deductible up to certain limits. You can deduct your unreimbursed healthcare expenses that exceed 10% of your adjusted gross income. So, take care of as many of your family’s medical needs as soon as possible before the end of the year.

Set up appointments and pay for prescriptions and other deductible healthcare expenses as soon as you can.

There is a wide variety of deductible healthcare expenses, including medical, dental, vision, hearing, and mental health providers. Your medications, eyeglasses, contacts, medical equipment, and travel for medical care also count. Set up appointments and pay for prescriptions and other deductible healthcare expenses as soon as you can.

Home mortgage interest is deductible on your primary residence, as well as on a second home. You can also deduct your property taxes and any points paid when you purchased the home. If you’re a homeowner, you could make your property tax payment ahead of time and pay your January mortgage payment by December 31, so you have additional interest to deduct this year.

Student loan interest is deductible up to certain limits, even if you don’t itemize deductions. In general, you can deduct up to $2,500 of interest paid on education loans.

If you paid more than $600 in interest to a single student loan lender during the year, you should receive Form 1098-E. But even if you don’t receive the form, you may still be entitled to the deduction. Check with your lender to learn more.

6. Spend your credit card rewards

If you use credit cards, they probably give you a variety of rewards, such as travel credits, points for purchases, and gift cards. Some of these benefits may expire at the end of the year. Instead of losing track, log on to your account and take advantage of them, pronto!

7. Review your emergency documents and beneficiaries

If you had any significant life changes during the year, such as a marriage, divorce, or children, be sure to update your emergency documents. These might include a will, healthcare proxy, and power of attorney. And, if you don’t have these critical documents yet, make an appointment with an attorney to set them up as soon as possible. Without them, your wishes about many end-of-life issues may not be clear or carried out the way you'd want.

Beneficiaries you name on workplace retirement accounts, annuities, and life insurance policies supersede your will. If you have an ex-spouse that you wouldn’t want to inherit your 401(k), you need to remove them immediately.

Also, review who you’ve named as beneficiaries on important financial accounts. Many people don’t realize that the beneficiaries you name on workplace retirement accounts, annuities, and life insurance policies supersede your will. In other words, if you have an ex-spouse that you wouldn’t want to inherit your 401(k), you need to remove them immediately.

While this tip to get your documents in order may not save money before the New Year, it can set your family and heirs up for success if you die or are no longer able to handle your personal affairs. As you spend time with friends and family during the holidays, it might be an excellent opportunity to discuss your estate plans and any changes that you should make. Talking about grim issues—such as death, becoming incapacitated, or naming guardians for minor children—can be difficult. But addressing them can also give you peace of mind.

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

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